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Before There Were Checks: The History of Money

As it has been said many times “money makes the world go ‘round.” This concept has been true for thousands of years. It is very rare that anything comes free and in order to get anything a person must somehow pay for their goods and services they receive. How people pay for things has evolved from non-monetary exchange to the now widely popular plastic cards of today one thing holds true; if a person does not have money to buy items or pay for services then it is not likely they will get those items or services. Soon enough people figured out a way to barter with non-monetary exchange.

Non-monetary exchange was how people initially obtained goods and services. This was done by bartering or using gift exchange. This method is the process of exchanging gifts or services for other gifts or services with no medium of exchange. The rules on debt, law codes, and legal contracts as it relates to business practices and private property was started in ancient Babylon back in 1760 BC which was put in place to keep people in line on how they handled things without a medium of exchange. Although bartering worked well for a while there were some issues. Because of these issues the use of commodity money came into play.

Commodity money was non-perishable items such as cowry shells but coinage, gold and silver, was preferred because it was durable and more easily portable. Eventually the coinage would be stamped with pictures or words in order to show authority. Trade bills of exchange then started becoming a popular. This worked something similar to the credit we know of today. Goods were exchanged for services in a promise to make a payment at a future date. Paper wasn’t as easily accessible or it was just too expensive so people needed a way to provide something similar to a receipt and so they used something called Tallies.

Tallies were used to keep track of taxes owed or as a receipt that we know today. Goldsmith bankers were similar to banks or lenders as we know today. They held money that was deposited and could use as they wished. They in turn could even loan money to other customers which was repayable over a long length of time. The main purpose of the goldsmith banker was to promote trade. As banking progressed demand deposits became the main practice. With this practice funds were deposited and made available for withdraw whenever the depositor needed it. Eventually banknotes started being used as a paper exchange.

Banknotes are basically what we know as cash today. It is paper money used in exchange for goods or services. Representative money is physical tokens that can be exchanged for a fixed quantity of a commodity. Fiat money is not derived from any intrinsic value. There is not guarantee that it can be converted into something more valuable. Fiat money only has value by government order meaning it is a currency that must be accepted as repayment for goods and services.

Throughout history the way in which we pay for goods and services has continued to evolve from bartering and gift exchanges to now paying with a plastic card that is swiped in a machine. With the advances in technology people can now send and receive money through an online account. They can use the money in this account to shop as well with it never making it to an actual bank account. As technology continues to advance the ways in which we purchase things or handle money are almost certain to advance as well.

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